Sri Lanka president meets with IMF to resolve economic crisis

In other to save the country’s economy, President Gotabaya Rajapaksa has said that Sri Lanka in collaboration with the International Monetary Fund will set a target to cut its trade deficit by about 14% in the year running 2022.

The correspondents of TopNaija.ng revealed this on Wednesday, adding that the country’s foreign exchange reserves have reportedly fallen by 70% in the past two years to about $2.31 billion making it difficult to pay important import tariffs which includes fuel and food.

“I have decided to work with them after examining the advantages and disadvantages,” Rajapaksa explained in his address to the nation.

“We must take action to increase our foreign exchange reserves. To this end, we have initiated discussions with international financial institutions as well as with our friendly countries regarding repayment of our loan installments.”

However, China and India have supported Sri Lanka financially through credit lines and currency swaps.

According to Rajapaksa, Sri Lanka will intensify their effort in reducing the trade deficit to $7 billion this year from last year’s $8.1 billion saying the government still expects $5 billion to be remitted as shore up for state finances, close to what was recorded last year.

Sri Lanka would have experienced her 17th financial rescue package if IMF’s programme of global lending falls through. This generally is accompanied by lots of condition like, abiding by fiscal goals.

The position of analysts is that the country will need to be in tandem with strong reform packages including transparent energy pricing, reforming state enterprises and revised taxes for government revenue optimization.

Dimantha Mathew who currently heads research at First Capital said, “Going to the IMF is a positive decision, but it is critical that debt repayment is stopped, and some level of debt restructuring is done because Sri Lanka’s main problem is high levels of debt.”

Rising fuel costs as now been identified by the president as the most serious issue experienced by his country.

The Democratic Socialist Republic of Sri Lanka, is an island country in South Asia. It lies in the Indian Ocean, southwest of the Bay of Bengal, and southeast of the Arabian Sea; it is separated from the Indian subcontinent by the Gulf of Mannar and the Palk Strait. Sri Lanka shares a maritime border with India and the Maldives. Sri Jayawardenepura Kotte is its legislative capital, and Colombo is its largest city and financial centre.